Three Ways Washington Poses a Risk to Recovery in 2013

Here’s another good story from the Washington Post on the various ways the recovery could be at risk in 2013 (see the 3 upside surprises to the economy here). Interestingly, the big risks they list all come from our own government:

These are the three major ways Washington could bungle the recovery.

Going off the cliff. This is the most scrutinized possibility, the one that has been widely analyzed (and, as of Thursday morning, at least, seemed like a growing possibility).

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A deal with too much austerity, too fast. Going off the fiscal cliff is probably not even the likeliest risk (though the odds are changing all the time). Another risk is that while there is a deal to avert the entirety of the cliff, it is a deal that calls for enough austerity in 2013 to seriously undermine the nation’s economic prospects.

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Debt ceiling hijinks. If the nation goes over the fiscal cliff, the results would be bad, but not catastrophic; we’ve had recessions before, we’ll have them again. But in late February or early March comes a deadline with even more at stake: The legally mandated cap on how much debt the Treasury can issue will become a binding constraint, setting the stage for the same messy negotiations that walloped financial markets and business confidence in the summer of 2011.